Paytm Payments Bank crisis: Who wins from Paytm's loss?

With severe restrictions imposed on Paytm Payments Bank by the regulator, there have been questions about how its payments business may get impacted, and whether users will shift to other platforms amid the crisis.

Data shared by app intelligence firm Appfigures with CNBC-TV18 shows that while downloads of the Paytm app have slowed in the days since Reserve Bank of India (RBI) announced restrictions on its banking business on January 31 evening, while that of its competitor payment apps like BHIM and PhonePe have risen.

As per Appfigures, data collated from downloads on Google Play, ie Andriod phones only, shows that Paytm app downloads fell to 8.67 lakh in the first ten days of February (February 1-10) compared to 10.14 lakh downloads in the ten days prior (January 22-31) to the RBI ban on its banking and wallet activities.

During the same period, its competitor PhonePe saw its app downloads rise from 21.95 lakhs between January 22nd to 31st, to 34.80 lakh during February 1 to February 10.

Google Pay also saw its downloads on Android phones rise from 8.44 lakh in the last ten days of January to 9.85 lakh in the first ten days of February. But the biggest beneficiary of all, as per Appfigures data, was National Payments Corporation of India (NPCI)'s Bharat Interface for Money (BHIM).

BHIM saw its app downloads jump more than double from 10.26 lakh in the last ten days of January to 25.51 lakh in the first ten days of February following RBI’s action against Paytm Payments Bank.

In the days between February 11 to February 13, Paytm saw an additional 2.22 lakh downloads, followed by Google Pay at 2.72 lakh downloads, PhonePe with 7.72 lakh downloads and BHIM with another 11.70 lakh downloads.

Merchants and small businesses focused BharatPe also saw 100% increase in merchant sign-ups across tier-1, tier-2, and tier-3 towns and cities across the country in the first week of February, compared to the same period the month before, i.e. the first week of January, as per company sources.

Its merchant sign-ups across metros experienced a month-on-month growth rate of over 104% during the same period, and its merchant onboarding at Tier 2 and Tier 3 cities clocked close to 95% growth month-on-month, as per sources.

Similarly, a survey by Kirana Club citied in multiple reports like that of Livemint, Business Standard said that 69% of respondents used to rely on Paytm QR codes for daily transactions at their stores.

However, within less than a week of RBI placing the bank under restrictions, 42% of Indian kirana stores moved to other payment apps and another 20 percent said they were planning to shift soon. Half the respondents to Kirana Club’s survey said PhonePe was their preferred choice, followed by Google Pay at 30%, and BharatPe at 10%.

RBI recently extended the deadline for curbs on Paytm Payments Bank to kick in by a fortnight to March 15, 2024 from February 29, 2024 earlier, after which the bank will be barred from undertaking any banking activities whatsoever, including allowing any further top-ups in its wallets, FASTags, mobility cards etc.

RBI also released an FAQ on Paytm Payments Bank, indicating that for customers, wallet/account balances will continue to be utilizable/transferable/refundable after 15 March, but they would not be able to top up their wallets after that.

FASTag customers have to get new FASTags as well.

Further, the RBI clarified that, in the case of merchants accepting payments using a Paytm QR code, Paytm soundbox, or Paytm POS terminal, services will not be disrupted only if the linked account is with any other bank (except PPBL).

For merchants having linked accounts or wallets with PPBL, they will not be able to receive any credits post mid-March 2024 other than refunds, cashbacks, interest, or sweep-ins from partner banks.

Late last week, Paytm announced that it had moved its nodal escrow account to Axis Bank from Paytm Payments bank to allow its merchants to continue to use the Paytm QR, POS or soundbox for accepting payments.

But for about 10-15% of its 4 crore-merchant base, the bank account would still have to be shifted to another bank to be able to continue using Paytm QRs etc.